China’s Economic Nationalism?

Today’s Wall Street Journal expresses shock that China is resorting to economic nationalism, which is supposed to be the exclusive right of the U.S. After all, China’s economy seems to be performing better than the U.S. — at least until a possible real estate bubble bursts. In addition, China does seem to be reining in its expansionary monetary policy, something the U.S. did not do as its bubble grew. Anyway, here are my extracts from the relevant articles.Browne, Andrew and Jason Dean. 2010. “Business Sours on China: Foreign Executives Say Beijing Creates Fresh Barriers; Broadsides, Patent Rules.” Wall Street Journal (17 March): p. A 1.http://online.wsj.com/article/SB20001424052748704688604575125650352968686.html#mod=todays_us_page_one

“Foreign businesses say their relationship with China is starting to sour, as tougher government policies and intensifying domestic competition combine to make one of the world’s most important markets less friendly to multinationals.
Interviews with executives, lawyers, and consultants with long experience in China point to developments they say are making it much harder for many foreign companies to succeed. They say the changes suggest Beijing is reassessing China’s long-standing emphasis on opening its economy to foreign business — epitomized by the changes it made to join the World Trade Organization in 2001 — and tilting toward promoting dominant state companies.”

“Technology executives say they are highly concerned about government procurement rules issued late last year that would favor local suppliers who have “indigenous innovation.” The rules, if implemented, could limit foreign access to tens of billions of dollars in contracts for computers, telecommunications gear, office equipment and other goods. Patent rules imposed Feb. 1 threaten to increase costs in China for foreign innovators in industries such as pharmaceuticals, and let authorities force foreign drug companies to license production to local companies at state-set prices.” Executives in several industries say the liberalization spurred by China’s WTO entry is stalling. Foreign makers of wind turbines and solar panels say they are being shut out of big renewable-energy projects. Regulatory barriers effectively cap participation in insurance: Foreign companies had just 4.7% of China’s life-insurance market as of June, and 1% of its property and casualty market, according to PricewaterhouseCoopers.”

“In the latest broadside against foreigners, authorities in a wealthy province near Shanghai Tuesday assailed the quality of luxury clothing brands from the West, including Hermès, Tommy Hilfiger and Versace.”

“In a statement posted on its Web site, the Zhejiang Administration of Industry and Commerce said that “International designer clothes, blindly worshipped by Chinese consumers and enjoying ‘super national treatment’ in the country, have once again proven unsuitable for China”.”

“According to the Zhejiang notice, 48 out of 85 samples of imported clothing from 30 international brands failed to meet Chinese product quality standards. The brands also included Versace, Dolce & Gabbana and Zara. The authorities say that they have impounded all of the clothes with the same model numbers as the samples that failed to meet the standards, but the rest of the companies’ products aren’t affected. It was unclear if any fines would be levied. The harsh tone of the attack appeared to be out of proportion to the actual infractions: half of the complaints were over usage labels, including laundry instructions that failed to meet Chinese requirements. Nevertheless, the statement was carried widely by China’s official media. While the immediate financial impact of the sanctions against the luxury brands is likely to be limited, the negative publicity could be damaging. Foreign brands sell at a huge premium to local brands, justified in part by the perception of quality.”